Dairy Quarterly Q3 2019: Cautious Growth Keeping the Markets Firm

Since the last RaboResearch Dairy Quarterly report, pricing dynamics for global dairy commodities have been uneventful, and the market has remained firm, but tension appears to be mounting. This is particularly true for cheese and powder prices, which have shown stability at relatively high levels. Several constraints have prevented supply growth despite higher farmgate milk prices, and a warm summer is partially to blame, particularly in China and Northern Europe.

Picture of milk bottles in supermarket

“Economic risks highlighted in previous Dairy Quarterly reports are turning to reality,” according to Tom Bailey, Senior Dairy Analyst at Rabobank. “China posted its weakest year-on-year GDP growth in 30 years through Q2 2019 versus 2018, and Southeast Asian markets have been impacted. Similar challenges face the EU, as Germany saw its economy contract in Q2 compared with last year, a worrying sign for a market facing other challenges, with a possible challenging end to Brexit. The European Central Bank responded by lowering rates by 0.5% and announcing an open-ended quantitative easing of EUR 20bn a month as recession risks rise. The US has also shown some concerning data, the treasuries 2-10 year yield curve finally inverting fueling speculation of an impending recession.”

Trade wars remain a logistical headache for dairy exporters although they are unlikely to have a significant impact on the mass balance of product flows over the next 12 months. The global dairy market has become more liquid in recent years, allowing flexibility in supply.

Overall, the global dairy market looks set to remain firm through the coming six months before supply is able to get out ahead of demand growth, at which point we might see some downside pricing pressure.

Much more can be found in Rabobank's Dairy Quarterly Q3 2019 report.

  • Tom Bailey

    Senior Analyst - Dairy
    Read more
  • Mary Ledman

    Global Sector Strategist – Dairy
    Read more
  • Emma Higgins

    Analyst - Dairy
    Read more
  • Michael Harvey

    Senior Analyst - Dairy
    Read more
  • Andrés Padilla

    Senior Analyst - Beverages, Dairy, F&A Supply Chains
    Read more
  • Sandy Chen

    Senior Analyst - Dairy
    Read more
  • Saskia van Battum

    Analyst – Dairy
    Read more
  • Richard Scheper

    Associate Analyst - Dairy
    Read more
  • Shiva Mudgil

    Analyst - Dairy
    Read more
  • Ben Laine

    Analyst - Dairy
    Read more